Human Capital and Macroeconomic Growth: Austria and Germany 1960-1997. An Update

In an influential paper Mankiw, Romer, and Weil (1992) argue that
the evidence on the international disparity in levels of per capita
income and rates of growth is consistent with a standard Solow
model, once it has been augmented to include human capital as an
accumulable factor. In a study on Austria and Germany we augment
the Solow model to allow for the accumulation of human capital.
Based on a perpetual inventory estimation procedure we construct an
aggregate measure of the stock of human capital of Austria and
Germany by weighting workers of different schooling levels with
their respective wage income. We obtain an estimate of the wage
income of workers with different schooling from a Mincer type wage
equation which quantifies how wages change with years of schooling.
We find that the time series evidence on Austria and Germany is not
consistent with a human capital augmented Solow model. Factor
accumulation (broadly defined to include human capital) appears to
be less (and not more) able to account for the cross-country growth
performance of Austria and Germany when human capital accumulation
is included in the analysis. Our results indicate that differences
in technology are a driving factor in understanding cross country
growth between these two neighboring countries with similar
political and institutional background.